RICHMOND, Va.--(BUSINESS WIRE)--May 10, 2018--
Owens
& Minor, Inc. (NYSE: OMI) today reported financial results for
the first quarter ended March 31, 2018, including consolidated revenues
of $2.37 billion, representing an increase of 1.9%, when compared to
revenues of $2.33 billion in the first quarter of 2017. Quarterly net
income was $8.2 million compared to $18.8 million, or $0.13 per diluted
share, compared to $0.31 for the first quarter of last year. Adjusted
net income (non-GAAP) was $26.2 million compared to $26.4 million, or
$0.43 per share, compared to $0.44 per share in last year’s first
quarter. A reconciliation of reported results to adjusted (non-GAAP)
measures is included below.

Consolidated operating income for the first quarter of 2018 was $24.2
million compared to $35.5 million in last year’s first quarter. Adjusted
consolidated operating income (non-GAAP) for the first quarter was $47.6
million compared to $47.7 million for the same period last year.

“We are pleased to have completed the acquisition of Halyard Health’s
S&IP business, which represents a meaningful step in the evolution of
our business. Together, the Halyard S&IP business and Byram Healthcare
serve to strengthen and diversify our business model,” said P. Cody
Phipps, chairman, president & chief executive officer of Owens & Minor.
“Our quarterly results improved sequentially, consistent with our
expectations, as we continued to transform our business. By combining
the Halyard S&IP business with our existing products group, our Global
Products strategic business unit has an enhanced presence in the medical
products sector with approximately $1.5 billion in annualized revenues.
This transaction gives Owens & Minor a global platform for growth with a
strong product portfolio and exceptional teammates.”

Acquisition of Halyard Health S&IP Business

On April 30, 2018, the company completed the acquisition of Halyard
Health’s S&IP business. Halyard S&IP’s highly regarded surgical and
infection prevention offerings range from sterilization wraps, surgical
drapes and gowns, facial protection and protective apparel to medical
exam gloves and include brands such as AEROBLUE and AEROCHROME; exam
gloves including PURPLE, LAVENDER and STERLING; and sterilization wraps
such as ONE-STEP, QUICK CHECK and SMART-FOLD. This business will become
an essential part of the Global Products Strategic Business Unit. With
access to markets in 90 countries, the Halyard S&IP business provides
Owens & Minor with global reach and a platform for growth.

To finance the transaction, Owens & Minor entered into new, multi-year
term loan agreements with banks and institutional lenders.

Segment Results

Owens & Minor is now operating under two Strategic Business Units
(SBUs)—Global Solutions and Global Products—reflecting the company’s
evolving business. Management believes the new SBU structure will create
better alignment within the organization. Results for these two new
segments include the following:

The Global Solutions SBU is comprised of the former Domestic and
International segments, which includes our U.S. and European
distribution, logistics and value-added services business, as well as
Byram Healthcare. Revenues for the first quarter of 2018 were $2.34
billion compared to $2.29 billion a year ago. Global Solutions’
operating income was $31.6 million compared to $38.0 million a year ago,
as a result of continued margin pressure and warehouse inefficiencies in
our distribution centers. Teams are actively working to resolve the
inefficiencies. Byram Healthcare, acquired in August 2017, contributed
positively to quarterly results, adding $118 million to revenues. Byram
is bringing significant momentum to Owens & Minor’s strategy to serve
the market along the continuum of care.

The Global Products SBU is comprised of our former Proprietary
Products segment, which includes Global Sourcing, Clinical & Procedural
Solutions (CPS), and now the Halyard S&IP business. Revenues in the
first quarter of 2018 were $121 million compared to $137 million for the
same period last year. Because the acquisition was completed on April
30, 2018, Global Products first quarter results do not reflect
contributions from Halyard S&IP revenues. The quarterly revenue change
resulted primarily from the previously discussed loss of customers last
year. However, Global Products’ operating income increased by $1.7
million to $9.8 million, as a result of improved operating efficiencies.

Asset Management

The balance of cash and cash equivalents was $87.6 million at March 31,
2018, compared to $105 million at December 31, 2017. For the quarter,
the company reported operating cash flow of $18.3 million, compared to a
use of cash of $26.4 million for the same period last year. For the
quarter, asset management metrics included consolidated days sales
outstanding (DSO) of 28.9 compared to 28.7 days as of year-end.
Consolidated inventory turns were 8.3 times for the first quarter,
compared to 8.5 times in 2017.

Upcoming Investor Events

Owens & Minor plans to participate in the following investor conferences
in the second quarter of 2018 and the company will post webcasts of
formal presentations on its corporate website:

Bank of America Merrill Lynch 2018 Healthcare Conference; May 15

Goldman Sachs 2018 Global Healthcare Conference; June 12

Investors Conference Call & Supplemental
Material

Conference Call: Owens & Minor will conduct a conference call for
investors on Thursday, May 10, 2018, at 8:30 a.m. EDT. The access code
for the conference call, international dial-in and replay is #5037238.
Participants may access the call at 866-393-1604.The
international dial-in number is 224-357-2191. Replay: A replay of the
call will be available for one week by dialing 855-859-2056. Webcast: A
listen-only webcast of the call, along with supplemental information,
will be available on www.owens-minor.com
under the Investor
Relations section.

Safe Harbor Statement

This release is intended to be disclosure through methods reasonably
designed to provide broad, non-exclusionary distribution to the public
in compliance with the SEC's Fair Disclosure Regulation. This release
contains certain ''forward-looking'' statements made pursuant to the
Safe Harbor provisions of the Private Securities Litigation Reform Act
of 1995. These statements include, but are not limited to, statements
related to the Company’s expectations regarding the performance of its
business, growth, and the performance of the recently acquired Halyard
S&IP business. Forward-looking statements involve known and unknown
risks and uncertainties that may cause our actual results in future
periods to differ materially from those projected or contemplated in the
forward-looking statements. Investors should refer to Owens & Minor’s
Annual Report on Form 10-K for the year ended December 31, 2017, filed
with the SEC including in the sections captioned “Cautionary Note
Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and
subsequent quarterly reports on Form 10-Q and current reports on Form
8-K filed with or furnished to the SEC, for a discussion of certain
other known risk factors that could cause our actual results to differ
materially from our current estimates. These filings are available at www.owens-minor.com. Given
these risks and uncertainties, we can give no assurance that any
forward-looking statements will, in fact, transpire and, therefore,
caution investors not to place undue reliance on them. We specifically
disclaim any obligation to update or revise any forward-looking
statements, whether as a result of new information, future developments
or otherwise.

Owens & Minor uses its web site, www.owens-minor.com,
as a channel of distribution for material company information, including
news releases, investor presentations and financial information. This
information is routinely posted and accessible under the Investor
Relations section.

Included with the press release financial tables are reconciliations of
the differences between the non-GAAP financial measures presented in
this news release, which exclude acquisition-related and exit and
realignment charges, and their most directly comparable GAAP financial
measures.

About Owens & Minor

Owens & Minor, Inc. (NYSE: OMI) is a global healthcare solutions company
with integrated technologies, products, and services aligned to deliver
significant and sustained value for healthcare providers and
manufacturers across the continuum of care. With 17,000 dedicated
teammates serving healthcare industry customers in 90 countries, Owens &
Minor helps to reduce total costs across the supply chain by optimizing
episode and point-of-care performance, freeing up capital and clinical
resources, and managing contracts to optimize financial performance. A
FORTUNE 500 company, Owens & Minor has annualized revenues exceeding $10
billion, including contributions from Halyard Health S&IP. Founded in
1882, Owens & Minor has operated continuously from its Richmond,
Virginia, headquarters. Today, the company now has distribution,
production, customer service and sales facilities located across Asia,
Europe, Latin America, and the U.S. For more information about Owens &
Minor, visit owens-minor.com,
follow @Owens_Minor
on Twitter, and connect on LinkedIn at www.linkedin.com/company/owens-&-minor.

Owens & Minor, Inc.

Consolidated Statements of Income (unaudited)

(dollars in thousands, except per share data)

Three Months Ended March 31,

2018

2017

Net revenue

$

2,372,579

$

2,328,573

Cost of goods sold

2,047,892

2,047,393

Gross margin

324,687

281,180

Distribution, selling and administrative expenses

284,361

237,693

Acquisition-related and exit and realignment charges

14,760

8,942

Other operating (income) expense, net

1,349

(972

)

Operating income

24,217

35,517

Interest expense, net

10,253

6,744

Income before income taxes

13,964

28,773

Income tax provision

5,813

9,988

Net income

$

8,151

$

18,785

Net income per common share:

Basic and diluted

$

0.13

$

0.31

Owens & Minor, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(dollars in thousands)

March 31, 2018

December 31, 2017

Assets

Current assets

Cash and cash equivalents

$

87,632

$

104,522

Accounts receivable, net

778,155

758,936

Merchandise inventories

1,021,711

990,193

Other current assets

300,275

328,254

Total current assets

2,187,773

2,181,905

Property and equipment, net

207,042

206,490

Goodwill, net

715,445

713,811

Intangible assets, net

178,880

184,468

Other assets, net

102,414

89,619

Total assets

$

3,391,554

$

3,376,293

Liabilities and equity

Current liabilities

Accounts payable

$

958,270

$

947,572

Accrued payroll and related liabilities

30,480

30,416

Other current liabilities

337,230

331,745

Total current liabilities

1,325,980

1,309,733

Long-term debt, excluding current portion

897,071

900,744

Deferred income taxes

73,180

74,247

Other liabilities

76,405

76,090

Total liabilities

2,372,636

2,360,814

Total equity

1,018,918

1,015,479

Total liabilities and equity

$

3,391,554

$

3,376,293

Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

Three Months Ended March 31,

2018

2017

Operating activities:

Net income

$

8,151

$

18,785

Adjustments to reconcile net income to cash provided by (used for)
operating activities:

Depreciation and amortization

17,911

12,558

Share-based compensation expense

3,035

2,511

Provision for losses on accounts receivable

1,073

(603

)

Deferred income tax (benefit) expense

(1,482

)

(825

)

Changes in operating assets and liabilities:

Accounts receivable

(18,519

)

1,554

Merchandise inventories

(30,556

)

(32,777

)

Accounts payable

9,478

(7,341

)

Net change in other assets and liabilities

28,904

(24,965

)

Other, net

278

4,743

Cash provided by (used for) operating activities

18,273

(26,360

)

Investing activities:

Additions to property and equipment

(7,074

)

(10,146

)

Additions to computer software and intangible assets

(7,086

)

(4,622

)

Proceeds from sale of property and equipment

—

315

Cash used for investing activities

(14,160

)

(14,453

)

Financing activities:

Borrowings (repayments) under revolving credit facility

(300

)

—

Repayments of debt

(3,125

)

—

Cash dividends paid

(16,074

)

(15,740

)

Other, net

(2,304

)

(2,759

)

Cash used for financing activities

(21,803

)

(18,499

)

Effect of exchange rate changes on cash and cash equivalents

800

991

Net (decrease) increase in cash and cash equivalents

(16,890

)

(58,321

)

Cash and cash equivalents at beginning of period

104,522

185,488

Cash and cash equivalents at end of period

$

87,632

$

127,167

Owens & Minor, Inc.

Summary Segment Information (unaudited)

(dollars in thousands)

Three Months Ended March 31,

2018

2017

% of

% of

consolidated

consolidated

Amount

net revenue

Amount

net revenue

Net revenue:

Segment net revenue

Global Solutions

$

2,341,122

98.68

%

$

2,288,955

98.30

%

Global Products

121,287

5.11

%

137,153

5.89

%

Total segment net revenue

2,462,409

2,426,108

Inter-segment revenue

Global Products

(89,830

)

(3.79

)%

(97,535

)

(4.19

)%

Total inter-segment revenue

(89,830

)

(97,535

)

Consolidated net revenue

$

2,372,579

100.00

%

$

2,328,573

100.00

%

% of segment

% of segment

Operating income (loss):

net revenue

net revenue

Global Solutions

$

31,625

1.35

%

$

37,951

1.66

%

Global Products

9,811

8.09

%

8,128

5.93

%

Inter-segment eliminations

(242

)

(698

)

Acquisition-related and exit and realignment charges

(14,760

)

(8,942

)

Other (1)

(2,217

)

(922

)

Consolidated operating income

$

24,217

1.02

%

$

35,517

1.53

%

Depreciation and amortization:

Global Solutions

$

15,781

$

10,664

Global Products

2,130

1,894

Consolidated depreciation and amortization

$

17,911

$

12,558

Capital expenditures:

Global Solutions

$

13,602

$

13,840

Global Products

558

928

Consolidated capital expenditures

$

14,160

$

14,768

(1) Software as a Service (SaaS) implementation costs
associated with significant global IT platforms in connection with
the redesign of our global information system strategy.

The following items in the current quarter have been excluded in our
non-GAAP financial measures:

(1) Acquisition-related intangible amortization includes
amortization of certain intangible assets established during purchase
accounting for business combinations. These amounts are highly dependent
on the size and frequency of acquisitions and are being excluded to
allow for a more consistent comparison with forecasted, current and
historical results and the results of our peers. We began to exclude
these charges from our non-GAAP results in the second quarter of 2017
and thus prior year amounts have been recast on the same basis.

(2)Acquisition related expenses in the current quarter
consist primarily of transition and transaction costs for the Halyard
S&IP transaction and Byram and in first quarter of 2017 consist
primarily of transition and transaction costs for Byram.

(3) Exit and realignment charges in 2018 were primarily
associated with establishment of our Client Engagement Center. Amounts
in 2017 were associated with the write-down of information system assets
which are no longer used and severance charges from reduction in force
and other employee costs associated with the establishment of our new
client engagement center.

(4) Software as a Service (SaaS) implementation costs
associated with the upgrading of global IT platforms in connection with
the redesign of our global information system strategy. SaaS
implementation costs are recorded in other operating (income) expense,
net.

(5)These charges have been tax effected in the preceding
table by determining the income tax rate depending on the amount of
charges incurred in different tax jurisdictions and the deductibility of
those charges for income tax purposes.

Use of Non-GAAP Measures

This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP"). In general, the measures exclude items and
charges that (i) management does not believe reflect Owens & Minor,
Inc.'s (the "Company") core business and relate more to strategic,
multi-year corporate activities; or (ii) relate to activities or
actions that may have occurred over multiple or in prior periods
without predictable trends. Management uses these non-GAAP financial
measures internally to evaluate the Company's performance, evaluate
the balance sheet, engage in financial and operational planning and
determine incentive compensation.

Management provides these non-GAAP financial measures to investors
as supplemental metrics to assist readers in assessing the effects
of items and events on its financial and operating results and in
comparing the Company's performance to that of its competitors.
However, the non-GAAP financial measures used by the Company may be
calculated differently from, and therefore may not be comparable to,
similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not
be considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements set forth above should be carefully evaluated.